Business > CASE STUDY > Bergerac Systems The Challenge of Backward Integration By David A. Garvin, Sunru Yong (Case Notes/ A (All)

Bergerac Systems The Challenge of Backward Integration By David A. Garvin, Sunru Yong (Case Notes/ Answer with Free Case File)

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Bergerac Systems is a small, rapidly growing manufacturer of diagnostic instruments used in veterinary practices. In 2007, the company launched its OmniVue chemistry analyzer, which has been success... ful, particularly among small and medium-sized veterinary clinics. To conduct a diagnostic test, veterinarians place blood or serum samples from the pet into a proprietary cartridge, which is inserted into the OmniVue for analysis. The sale of consumable cartridges for the installed base of OmniVue instruments fits the classic Gillette “razor-blade” model and is critical to the company’s economic model. Bergerac Systems has been relying on two outside suppliers for the plastic components of the cartridge, but has experienced inconsistent delivery leading to shortages and stock-outs. Ian Wyckoff, the CEO, is considering two potential solutions—the acquisition of GenieTech, one of its current suppliers, or the development of an in-house molding facility to be located at the current plant. The director of planning, Bob McCarthy, has analyzed the two alternatives and written a proposal that recommends that Bergerac Systems invest in developing in-house molding capability. The CEO must evaluate the evidence in the proposal, the market forecast, and expected production capacities to make a decision. [Show More]

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